New Zealand’s unemployment rate rose
more than forecast in the fourth quarter, sending the local
currency lower and reducing the case for the central bank to
raise interest rates in coming months.

The jobless rate increased to 6.8 percent from 6.4 percent
three months earlier, Statistics New Zealand said today. The
median estimate of 10 economists surveyed by Bloomberg News was
for 6.5 percent. The New Zealand dollar fell to 77.41 U.S. cents
at 1:11 p.m. in Wellington from 77.76 cents before the data.

Rising unemployment, along with falling house prices,
threaten to damp a projected rebound from the economy’s
contraction in the third quarter. Central bank Governor Alan Bollard last month kept interest rates unchanged, saying it was
prudent to keep borrowing costs low until growth strengthens.

“It has changed our thinking about the timing of the Reserve Bank’s forward path,” said Craig Ebert, senior markets
economists at Bank of New Zealand Ltd. in Wellington, who
shifted his prediction for a rate increase to September from
June. Rising unemployment shows the economy “struggled” in the
final three months of the year, Ebert added, seeing a risk of a
second straight drop in gross domestic product.

House prices fell in December for the third time in four
months, according to an index published by the Real Estate
Institute on Jan. 18. A net 21 percent of companies surveyed
last quarter by the New Zealand Institute of Economic Research
said that profits declined, the Wellington-based research group
reported on Jan. 11.

Benchmark Rate

Bollard kept the official cash rate at 3 percent on Jan.
27. Five of 12 economists surveyed by Bloomberg last month,
including Ebert, forecast a rate increase in June. Seven
predicted the first move will be in the third quarter.

Gross domestic product unexpectedly shrank 0.2 percent in
the third quarter. Bollard last week said he expects the economy
avoided a recession by expanding in the three months through
December.

New Zealand’s government has weathered the economic
deterioration, with its popularity at 55 percent compared with
the main opposition Labour Party at 29 percent, according to a
Roy Morgan Research poll of 1,800 voters last month. Prime
Minister John Key yesterday called a general election for Nov.
26, saying the campaign will be about which party has a plan for
jobs and income growth.

Employment Falls

Employment fell by 0.5 percent, or 11,000 jobs, from the
third quarter, when it climbed a revised 1.1 percent, today’s
report showed. Economists predicted a 0.2 percent increase. From
a year earlier, employment rose 1.3 percent.

Pike River Coal Co. in December fired 130 workers after an
explosion that killed 29 miners and closed the mine forced the
company to appoint administrators. Auckland City, the nation’s
most populous municipality, fired 650 managers and workers in
November after the amalgamation of eight councils into a single
authority.

The labor force participation rate dropped to the lowest in
seven quarters, to 67.9 percent, from a revised 68.3 percent
three months earlier. The rate fell because about 17,000 more
people said they were no longer employed or looking for work.
The number of people unemployed rose 8,000 to 158,000.

The results “indicate a further deterioration in the labor
market,” Peter Gardiner, labor market statistics manager at Statistics New Zealand, said in a statement. “The labor market
has struggled to gain momentum following the recent economic
downturn.”

Full-time employment increased by 5,000 jobs, or 0.3
percent, from the third quarter. Part-time employment declined
14,000, or 2.8 percent. Statistics New Zealand adjusts the full-
and part-time employment figures separately, which means they
may not add up to the total change in employment.